Apple Shares Still A Good Deal

The punditry is full of alarmist messages that Apple has lost its mojo due to the perception that the companies corporation's growth has reached its zenith. I am prepared to state that while I have only reviewed the summary of the statements made by Apple, it is clear that most of the pundits are either ignorant or deliberately distorting the picture.

To start with, an amazing run of nearly a decade of quarter after quarter of increasing profit levels is statistically rare and would be expected to come to an end sometime during the corporation's lifetime. because of that superior accomplishment, it is annoying that this end in growth rate of profits is being read as marking an end to the corporation's dominance based on a fall in share prices.

Added to the above, one would think that Apple released a product that performed poorly when the release of the iPhone in late 2012 went really well and is still the gadget to beat in the smart phone category. It is true that the targets set by financial analysts were not met neither set nor endorsed by the management of Apple. Financial analysts are perfectly entitled to setting sales, market share and revenue targets as they judge fit but are not allowed to reverse themselves when those targets are not met by suggesting that the firm is doing poorly.

So while the share price has fallen, I am certain that those who are selling away are not making a good decision based on the results of a quarter in which revenues were high but profits dropped. To my mind, this is perfect illustration of the poor link between equity values and the performance of a corporation.  As Cassie Slane states here, the share price is lower than it was a decade ago. This is perhaps the moment to buy into Apple. 

Busting Collusion Over Books

I did not record it on this blog but it occurred to me that the tough bargain that Apple reached with the publishers on e-books was potentially troublesome. At the time, the idea was that publishers wanted an alternative that ensured that they maintained control of the cost of e-books in the quest to break the perceived  stranglehold on the market by Amazon. Notwithstanding my admiration for Apple, I support the enquiry by the US Department of Justice with the claim that Apple and the publishers colluded to fix prices and thereby raise their revenues in way that was harmful to buyers.

Brian Balker of the Guardian provides the background together with details of the claim by the US Government here. In spite of my reluctance to support government intervention against businesses, I think that this has sufficient justification. To start with, Amazon had placed most publishers in a place where they were the prices of e-books were moving towards marginal cost. The agreement that forms the justification for this suit ensured that publishers maintained the bizarre pricing that made no sense to anyone else but the few publishers. Since then, even Amazon has had to be more cautious in pricing books because it could have been isolated since the iPad gave substantial power to Apple.